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The Boeing Company (BA): All Hell's Breaking Loose

(By Mani) It seems all hell is breaking loose on The Boeing Company (NYSE: BA). As the leading aerospace major is working to solve the battery issue on flagship 787 planes, it faces a potential strike from its engineering workers over their contracts.

The Society of Professional Engineering Employees in Aerospace (SPEEA) has recommended that its members reject Boeing's contract proposal, which the company has labeled "best and final", and authorize a strike.

Voting commences on Feb.5 and runs through Feb. 19. The key issue with Boeing's contract is that it scrapped the define pension plan for new workers, and their retirement benefits were also slashed by 40 percent.

Though a potential strike won't shut down Boeing's production system overnight, but an extended walk-out would be massively disruptive to both the mature portfolio production in both commercial defense space as well as the ongoing 787 ramp. A strike would also affect the investigation of the 787 battery fiasco.

"It's unclear whether a strike will actually occur (even a vote for a strike could drive a quick compromise), but the uncertainty continues to hang over the stock (along with the grounded 787)," UBS analyst Myles Walton wrote in a note to clients.

Whatever may be the case, these issues could weigh on Boeing shares in the near-term as historically investors have shed their positions before the strike. In the last 5 strikes (2008, 2005, 2000, 1995, and 1989), shares fell 5.3 percent, on an average, over the 10 day period prior to the start of the strike, according to data from FactSet.

The SPEEA, which represents 23,000 Boeing engineers, fears that elimination of the pension for new hires could be the first step towards freezing the pension for existing employees. A large percentage of the SPEEA membership is expected to retire during the next decade. If projections hold, it's entirely possible that the tipping point (where the majority of SPEEA members are those without the pension) could happen within two contract negotiation cycles.

Once this group with the lesser benefit attains majority status in the union, it is expected that Boeing will insert the freezing of existing pensions into its last-best-final contract offers.

On the other hand, Boeing wants to cut its pension liability, which is hovering around $68 billion and even exceeds the company's market capitalization of $56 billion. Boeing wants employees to move to a plan in which employer and employees contribute to tax-free 401(k) accounts from which workers can draw pension when they retire based on the market performance of their investments.

Meanwhile, Boeing would be hoping that the engineers and technical workers ratify the new contract quickly so that they can focus on fixing the company's troubled 787, which was recently grounded by the Federal Aviation Administration (FAA). All 50 787 planes are grounded worldwide while the probes continue in the U.S. and Japan.

Boeing asked the FAA for permission to conduct test flights of its 787 Dreamliner. The request indicates that BA is progressing towards a solution to the battery problems that grounded the entire 787 fleet last month.

THe FAA knew about the ion-battery where bad in 2007
and are not uses on any other boeing aicrafts
Speea was strike was in 1993
Boeing blame outsousing for its problems
The 787 is not the first program to be outsource to other aerospace company and supplier
the KC-135A in 1957, 747 in 1966, 757 &767 in 1972, 737NC in 2005, 777 in 1991, 2003 the 787
In the last 40 years Boeing has a become Multination Corporation that before Harry Stonecipher join the company Harry was from GE same a James McNerney and other Boeing broad members ( Not MDC)
Since the end of the 707,727, 737 classic, 70% of Boeing commercial has been off load into 70 countries and 25 states that before MDC
The 787 has been in the news for the last 4 years
The 7E7 program was started in 2003
Boeing will get its risk-sharing partners to absorb some of the development cost. But with its market cap shrinking to $23 billion, Boeing will have to guarantee that the 7e7 would produce at least an 8% margin over the program's 20-year life to make it worthwhile
http://www.socialistalternative.org/news/article12.php?id=729
http://www.businessweek.com/stories/2002-05-19/boeings-secret
http://www.socialistalternative.org/publications/boeing/
http://www.seattleweekly.com/2001-04-18/news/high-flying-crime/2/
Boeing said it would assemble one 787 every three days, Boeing should have delivery 300 to 400 787 to date! to date Boeing has only assembly 100 787 and delivery 50 in ten years
http://www.businessweek.com/print/bwdaily/dnflash/apr2003/nf20030410_9298_db035.htm?pi
http://blog.seattlepi.com/aerospace/2011/01/04/analyst-boeing-disastrously-executed-on-a-brilliant-vision/
But Speea contact is up for renewal and Speea think if its whine long enough Boeing will bring back all the out sourcing back in house
the 737, 747, 767,747 and 787 is outsource without all the problems !
Boeing CEO Frank Shrontz stated in 1999 that if Washington stated does become more business friendly Seattle could become the next rust belt Boeing labor cost is highest in the country
http://www.apnewsarchive.com/1999/Boeing-Warns-Wash-State/id-0d0671798532454a8c71e8c56cf15eb0

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